One of the points that should be clarified in the current fiscal debate is that Big Government spending is inherently bad, and not just because someone has to pay for it, or because the money must be conjured from the bowels of the Treasury.
Not all government spending is harmful. Obviously, there are things the State is supposed to do, and they cost money. But even when we get past the essential duties of government, it’s still possible for those little “stimulus” and “investment” pokes and prods to do some good… provided they, and the government making them, are little. There is a real difference between a relatively modest State throwing around small bags of loot, and a mega-State pumping out trillions in stimulus money. Whether the government is ethically or Constitutionally allowed to make these investments is an important, but different, point. We speak here of efficiency.
A European Central Bank study in 2011 determined that “government consumption is consistently detrimental to growth,” even when specifically intended to stimulate economic growth. One of the study’s findings was that large, big-spending governments produce low-quality programs rife with corruption and ideological blindness, leading to more harmful effects from large-scale taxation and spending. Smaller governments tend to be more disciplined, and spend their money with less harmful effect. Another way to put this finding is that the more money government spends, the more inefficient and corrupt it inevitably becomes; it gets bad when it gets big.
Government meddling in the economy distorts the marketplace, obscuring the clear guidance offered by the rules of supply and demand. Contrary to liberal mythology, no amount of government power can repeal the laws of supply and demand; they are eternal. But we can be prevented from hearing the signals those laws send to us, wasting resources in the pursuit of non-existent markets and over-hyped “opportunities.” Look at all of the subsidiary businesses, from manufacturing supplies to office cleaning services, that believed Solyndra’s huge facility offered them a stable and profitable market opportunity. Or consider the electric car, whose real demand is almost exactly zero – very few people want to buy these cars at their heavily subsidized prices, and virtually nobody would buy one at the true market price, which is often two to four times as high as the already inflated number on the sticker.
This distortion of information results in genuine, productive opportunities being lost. You’ll notice that Big Government enthusiasts never want to talk about the opportunity cost of spending and regulation. They don’t want to hear about the ideas that could not be pursued, the jobs regulated out of existence, the investments free people would have preferred to make voluntarily. The statist has no interest in what could have been.
Big Government produces dependency, and not just from individual welfare recipients; plenty of corporations are lined up to receive their subsidies, too. Business models across the land assume price supports, wealth transfers, and bailouts will always be available. Not only are both citizens and corporations weakened by welfare addiction, but they become a powerful force urging the further growth of the State… no matter how dangerous or un-affordable such growth might be. The primary “product” of the mega-State is further demand for an even bigger State, in a vicious cycle that ultimately passes beyond reason – right about the time socialists begin complaining that basic math is a tool of right-wing conspirators, and deficit problems can be solved by minting trillion-dollar platinum coins. And of course, all those deficits we’re piling up today will become irresistible demands for tax increases tomorrow.
The more money government spends, the larger it becomes. Tax increases further reduce the size of the private sector. The true power of the State is the sum of what it does, and what it takes. All that money from the State is going somewhere: punishing people who behave in ways the political class dislikes, rewarding those who follow its agenda, buying votes to protect itself from reform, over-ruling the judgment of the free market, providing advantages to some at the expense of others, luring companies away from tough competition in pursuit of easy government dollars.
Once the realm of Constitutional legal protection is passed, and the State begins doing anything beyond the fair and impartial protection of our basic rights, every dollar it spends is something We the People are forced to do. Carrots and sticks are both methods of controlling the donkey.
We are not wise to make the government the center of our lives. Political influence shouldn’t be the most valuable “resource” in the land. People shouldn’t view their fellow citizens as enemies, out to steal the State-provided bread and cheese from their tables. They should favor persuasion and competition over the brute business of winning elections and forcing their agendas down the throats of dissenters. But as government grows, and controls a greater share of our labor and property, that brute business becomes the only one worth patronizing.